It’s that weird political season between Election Day and the inauguration. But Congress is back in Washington, so let’s see if members can make any progress with President Obama on that phrase we all love to hate, the “fiscal cliff”!
Here are some thoughts:
A Taxing Problem, An Age-Old Problem – At some point the two sides will compromise, and I am betting the following will happen: Republicans will agree to raise the tax rates on people making over $400,000 per year (the President wants the level at $250,000). Democrats will agree to incrementally raise the retirement age for Social Security and Medicare benefits (it will probably only apply to people age 45 and younger). We’ve seen this before. Years ago my retirement age was indexed up from 65 to 67 years and 10 months. We are likely to have a similar plan. People are living and working longer – therefore paying into the plans – and, at the same time many are delaying the receipt of their benefits. At best, this is a short-term fix.
Deducting Deductions? – One of the items being tossed about is putting a cap on itemized deductions. Right now, things such as home mortgage interest and charitable contributions are fully deductible. There is discussion of a cap – say $50,000 per year for all deductions combined. I predict it will never happen. The lobbyists for these causes are just too powerful. The National Association of Realtors and Mortgage Bankers Association believe the home mortgage deduction is a big motivator for home ownership. Organizations such as Catholic Charities and the Red Cross depend on large donations (yes, even from people doing it simply for the tax advantage). Even if deductions are capped (and I doubt they will be), the levels will be so high as to only affect perhaps the top 1 percent of wage earners.
Jump! – So will we go over the fiscal cliff? Probably, at least for a while. Our government always operates in crisis mode. It is reactive; not proactive. We never seem to learn the lessons catastrophes like Hurricane Katrina and 9-11, or the messes that were the two government shutdowns in 1995. We wait until our house is engulfed in flames before calling the fire department! While the deadline for the fiscal cliff is January 1, I bet it will be more like February 1 before action takes place. All budget cuts and tax increases that happen after January 1 can be retroactively fixed. It will be a mess, but that’s how the U.S. does business.
The Pledge – One of the most persistent political issues for Republican candidates over the past 20 years has been pressure the take a pledge not to raise taxes. This wasn’t just a promise; it was a signed pledge and oath. The commitment was to Grover Norquist, founder of Americans for Tax Reform. I’ve always found it odd that any politician would swear to any pledge, other than the oath of office. I know the goal is to keep them honest and steadfast (and to keep taxes low), but politicians should be free to compromise, and, if they suffer the consequences from voters, then so be it. Pledge allegiance to the flag, and pledge to uphold the Constitution in the oath of office, but that’s where it should end.
White House Cantina – President Obama hosted his Republican rival for lunch in the Oval Office on Thursday. Their conversation was private, but the lunch menu was not. In a decidedly Latin twist, the men dined on white turkey chili and Southwestern grilled chicken salad. Maybe it was a subtle message: If Romney had spent more time courting and cultivating the nation’s growing Hispanic voter base, maybe he would have been hosting lunch for a defeated president. Food for thought anyway!
Oh, Christmas Tree! – Rhode Island was thrust into the national spotlight again this week and not in a positive way. For the second straight year Gov. Lincoln Chafee (I-RI) has been embroiled in a controversy over what to call the Christmas tree in the State House rotunda. He says it’s a secular “Holiday Tree” and held a lighting ceremony with only 30 minutes notice to the public, to avoid a protest like the one last year (photo above). According to a Providence Journal poll, 82 percent of respondents want it called a Christmas tree; 6 percent a holiday tree; and 12 percent checked the, “Who Cares?” box! The national TV exposure was brutal: http://www.youtube.com/watch?v=iMTBwmiXfCc. Most Rhode Islanders – if you ask them – want Santa Claus to bring more good paying jobs to a state with the second highest unemployment rate in the nation.
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